Exhibit 99.1

    Contact: D. Michael Jones, President and CEO Lloyd W. Baker, CFO (509) 527-3636  News Release

Banner Corporation Announces Fourth Quarter and Year End Results;

Includes $71 Million Goodwill Write-off and $124 Million TARP CPP Proceeds; Remains “Well Capitalized”

Walla Walla, WA – January 28, 2009 - Banner Corporation (NASDAQ GMS: BANR), the parent company of Banner Bank and Islanders Bank, today reported that it had a net loss of $78.5 million, or $4.72 per diluted share available to common shareholders, for the quarter ended December 31, 2008, compared to net income of $12.0 million, or $0.74 per diluted share, for the quarter ended December 31, 2007.  The current quarter’s results included a $71.1 million non-cash impairment charge to write-off the remaining balance of goodwill previously reflected on the Company’s books.  The current quarter’s net income also included a $33.0 million provision for loan losses and $13.7 million of net fair value gains.  Banner recorded a net loss of $128.0 million, or $7.94 per diluted share available to common shareholders (including a $121.1 million write-down of goodwill), for the year ended December 31, 2008, compared to net income of $36.9 million, or $2.49 per diluted share, for the year ended December 31, 2007.

“Deteriorating economic conditions and ongoing strains in the financial and housing markets presented an unusually challenging environment for Banner Corporation in 2008, which is reflected in our disappointing fourth quarter and year-to-date results,” said D. Michael Jones, President and CEO.  “This was particularly evident in our need to provide for credit losses at a significantly higher level than our historical experience.  Although we anticipate that credit costs will be elevated well into 2009, we continue to believe that our revenue generation and operating results will be sufficient to sustain our expectation to remain “well capitalized” under the regulatory guidelines while we continue to grow and improve our commercial banking franchise.”

“The challenging environment and faltering equity markets also caused us to take another hard look at the carrying value of goodwill and to conclude that it was appropriate to record a non-cash write-off of that asset,” continued Jones.  “At least annually, and more often if appropriate, all companies are required to determine the value of goodwill as an asset.  While there currently is a great deal of uncertainty with respect to the market valuation of certain other assets, declining stock prices for financial services companies clearly indicate that the value of goodwill for the industry has been severely diminished.  As a result of the significant decline in most banks’ common stock prices, including Banner’s, and the lack of merger transactions in recent months, measuring the value of goodwill has become difficult and imprecise at best; however, we have concluded that continuing to record it as an asset on our books would be inappropriate.  Therefore we have taken this action to reflect current market conditions as of December 31, 2008.  As goodwill is not a component of regulatory capital calculations, is ignored by most institutional investors and has no effect on liquidity or operations, there is no meaningful effect from this accounting entry.

“Despite obvious concerns related to the national economy, soft housing markets and financial market turmoil, we continue to have a positive view on the long-term economic prospects for the Northwest markets that we serve.  We are confident we have sufficient capital and human resources to manage the collection of our one-to-four family residential construction and related land loan portfolios in an orderly fashion while we maintain consistent forward momentum in our core operations.”

Credit Quality

“The housing market remained weak in many of our primary service areas during the fourth quarter, resulting in increasing delinquencies and non-performing assets, primarily in our construction and land development loan portfolios, and declining property values.  As a result, our provision for loan losses was at a significantly higher amount than our historical levels and normal expectations.” said Jones.  “In November and December, in particular, home and lot sales activity was exceptionally slow, causing additional stress on builders’ and developers’ cash flows and ability to service debt, which is reflected in our increased non-performing asset totals.  However, we remain confident that we can work our way through the housing market-related problems and we are actively engaged with our borrowers in resolving problem loans.  While property values have continued to decline, our reserve levels are substantial and, along with our impairment analysis and charge-off actions, reflect current appraisals and valuation estimates.”

Banner added $33.0 million to its provision for loan losses in the fourth quarter of 2008, compared to $8.0 million in the third quarter of 2008 and $2.0 million in the fourth quarter of 2007.  For the year ended December 31, 2008, Banner’s provision for loan losses was $62.5 million compared to $5.9 million for the year ended December 31, 2007.  The allowance for loan losses at December 31, 2008 was $75.2 million, representing 1.90% of total loans outstanding.  Non-performing loans were $187.3 million at December 31, 2008, compared to $119.4 million in the previous quarter and $42.4 million at December 31, 2007.  In addition, Banner’s real estate owned and repossessed assets were $21.9 million at December 31, 2008 compared to $10.2 million in the previous quarter and $1.9 million at

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December 31, 2007.  Banner’s net charge-offs in the current quarter totaled $16.6 million, or 0.42% of average loans.  Net charge-offs for the year ended December 31, 2008 were $33.1 million, or 0.84% of average loans.

One-to-four family residential construction and related lot and land loans represent 23% of the total loan portfolio and 82% of non-performing assets.  The geographic distribution of all construction and land development loans, including residential and commercial properties, is approximately 30% in the greater Puget Sound market, 40% in the greater Portland, Oregon market, and 9% in the greater Boise, Idaho market, with the remaining 21% distributed in various eastern Washington, eastern Oregon and northern Idaho markets served by Banner Bank.  While non-performing assets are similarly geographically disbursed, they are concentrated largely in land and land development loans.  The geographic distribution of non-performing construction, land and land development loans and real estate owned included approximately $81.0 million, or 47%, in the Puget Sound region, $72.6 million, or 40%, in the greater Portland market area and $16.7 million, or 9%, in the greater Boise market area.

“Other non-housing-related segments of the loan portfolio are beginning to show some signs of stress and increased non-performing loans as the effects of the slowing economy become more evident,” Jones added.  “We are sensitive to current economic conditions and are proactively monitoring and managing those portions of our portfolio as well.”

Income Statement Review

Banner’s net interest margin was 3.23% for the fourth quarter of 2008, compared to 3.45% in the preceding quarter and 3.82% for the fourth quarter of 2007.  For the year ended December 31 2008, the net interest margin was 3.45% compared to 3.99% for the year ended December 31, 2007.  Funding costs decreased nine basis points compared to the previous quarter and decreased 107 basis points from the fourth quarter a year earlier, while asset yields decreased 34 basis points from the prior linked quarter and 164 basis points from the fourth quarter a year ago.

“While funding costs improved as expected, we continued to experience decreasing asset yields during the fourth quarter which further reduced our net interest margin,” said Jones.  “Early in the quarter pressure on deposit pricing was intense, as system-wide liquidity concerns temporarily pushed competitive deposit rates higher despite the Federal Reserve’s efforts to lower market interest rates.  Those concerns abated as the quarter progressed, particularly following the announcement of increased FDIC insurance coverage, allowing deposit costs to decline modestly.  By contrast, the impact of the Federal Reserve’s three rate cuts was evident in lower loan yields and reduced borrowing costs.  In addition, our lower net interest margin also reflected the higher level of delinquencies, as non-accruing loans reduced the margin by approximately 34 basis points in this year’s fourth quarter compared to approximately 24 basis points in the third quarter of 2008 and approximately 16 basis points in the fourth quarter of 2007.”

For the fourth quarter of 2008, net interest income before the provision for loan losses was $35.6 million, compared to $37.6 million in the preceding quarter and $38.7 million in the same quarter a year ago.  Reflecting the lower margin, net interest income before the provision for loan losses decreased to $147.6 million for the year ended December 31, 2008, compared to $149.6 million for the year ended December 31, 2007.  Revenues from recurring operations* (net interest income before the provision for loan losses plus total other operating income excluding fair value adjustments) were $42.9 million in the fourth quarter of 2008, compared to $45.7 million for the third quarter of 2008 and $46.2 million for the fourth quarter a year ago.  Revenues from recurring operations for the year ended December 31, 2008 increased to $178.3 million, compared to $176.6 million in the year ended December 31, 2007.

Banner’s results for the fourth quarter of 2008 included a net gain of $13.7 million ($8.8 million after tax), compared to a net gain of $9.2 million ($5.9 million after tax) in the fourth quarter of 2007, for fair value adjustments as a result of changes in the valuation of financial instruments carried at fair value in accordance with the adoption of Statement of Financial Accounting Standards (SFAS) Nos. 157 and 159.  The fair value adjustments in the current quarter predominantly reflect changes in the valuation of trust preferred securities and junior subordinated debentures, both owned and issued by the Company.  For the year ended December 31, 2008, fair value adjustments resulted in a net gain of $9.2 million ($5.9 million after tax), compared to a net gain of $11.6 million ($7.4 million after tax) for the year ended December 31, 2007.

Total other operating income for the fourth quarter was $21.0 million compared to $16.7 million for the same quarter a year ago.  Total other operating income from recurring operations* (excluding fair value adjustments) for the fourth quarter was $7.3 million compared to $8.1 million in the preceding quarter and $7.5 million for the same quarter a year ago.  For the year ended December 31, 2008, total other operating income from recurring operations increased 14% to $30.7 million, compared to $27.0 million for the year ended December 31, 2007.  Primarily reflecting a recent slow-down in customer transaction volumes, income from deposit fees and other service charges decreased to $5.3 million in the fourth quarter of 2008, compared to $5.8 million for the preceding quarter.  By contrast, deposit fees and service charges increased by 10% from $4.8 million in the fourth quarter a year ago, largely as a result of growth in our customer base and related payment processing activities.  Income from mortgage banking operations decreased slightly in the fourth quarter to $1.4 million compared to $1.5 million in the preceding quarter, but was slightly higher than the $1.3 million recorded in the same quarter a year ago.  For the year, mortgage banking revenues declined modestly to $6.0 million from $6.3 million in 2007.  “The slowing economy adversely affected our payment processing business in the most recent quarter as activity levels for deposit customers, cardholders and merchants clearly declined; however, we are pleased with the year-over-year growth in our

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customer base and payment processing activities,” Jones noted.  “We are also pleased that our mortgage banking revenues have remained solid despite a very difficult year for housing finance.  Further, the currently very low level of interest rates has resulted in a significant increase in mortgage loan applications in recent weeks.”

“Controllable operating expenses were generally well managed in the fourth quarter reflecting continuing efforts to improve our processes and efficiency.  Unfortunately, collection and legal costs, including charges related to acquired real estate, remained high,” said Jones.  “In addition, FDIC insurance expense increased significantly as a result of increased assessment rates for the current quarter, as well as a $1.3 million correction of an error recognizing the appropriate coverage periods related to previous quarterly assessments, including $744,000 for the year ended December 31, 2007.  Although we anticipate collection costs will continue to be above historical levels for a number of future quarters, we expect continued expense discipline will be a positive factor going forward.”

Total other operating expenses from recurring operations* (non-interest expenses excluding the goodwill write-off) were $36.0 million in the fourth quarter of 2008, compared to $34.0 million in the preceding quarter and $35.3 million in the fourth quarter a year ago.  For the year ended December 31, 2008, other operating expenses from recurring operations were $138.9 million compared to $127.5 million in 2007.  The increase from the prior year reflects the effects of new branch openings, including two added in 2008 and ten at various times during 2007, as well as last year’s three acquisitions which added another 16 branches and nearly $800 million in total assets.  Operating expenses from recurring operations as a percentage of average assets was 3.06% in the fourth quarter of 2008, compared to 2.91% in the previous quarter and 3.20% in the fourth quarter a year ago.

*Earnings information excluding the goodwill impairment charge and fair value adjustments (alternately referred to as net operating income or net income from recurring operations and revenues or expenses from recurring operations) represent non-GAAP (Generally Accepted Accounting Principles) financial measures.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide more useful and comparative information to assess trends in the Company’s core operations reflected in the current quarter and year-to-date results.  Where applicable, the Company has also presented comparable earnings information using GAAP financial measures.

Balance Sheet Review

“New loan origination volumes were light in the fourth quarter, reflecting the slowing economic activity.  While commercial business loans increased meaningfully, continued payoffs of construction loans and seasonal declines in certain agricultural loans resulted in a modest decrease in total loan balances compared to the prior quarter end.” said Jones.  “Although slower in the fourth quarter, home sales have been sufficient to reduce the portfolio of one-to-four family construction loans by $193.1 million over the past twelve months, including a $61.8 million reduction in the most recent quarter.  As a result, at December 31, 2008 our one-to-four family construction loans have declined by $233.9 million compared to their peak quarter-end balance at June 30, 2007, and our aggregate construction and land development loan balances, including commercial and multi-family real estate, have declined by $190.2 million, also compared to their peak quarter-end balances at June 30, 2007.”  Net loans increased 3% to $3.89 billion at December 31, 2008, compared to $3.76 billion a year earlier.  Total assets also increased 2% to $4.58 billion at December 31, 2008, compared to $4.49 billion a year earlier.

Total deposits increased 4% to $3.78 billion at December 31, 2008, compared to $3.62 billion at December 31, 2007.  Non-interest-bearing accounts increased 5% and certificates of deposit increased 15% during the twelve months ended December 31, 2008, while total transaction and savings accounts decreased 7%.  “We continue to see a decline in average deposit balances for certain real estate-related customers as their business activity has slowed,” said Jones.  “We have also experienced further shifts into certificate of deposit accounts as customers have repositioned balances to obtain more attractive yields and additional deposit insurance coverage.  Still, we are optimistic that our expanded branch network will deliver core deposit growth and related fee income as we have experienced a healthy increase in the number of transaction deposit accounts.”

On November 21, 2008, Banner received $124 million from the U.S. Treasury Department as a part of the Treasury’s Capital Purchase Program.  This funding marked Banner’s successful completion of the sale of $124 million in senior preferred stock, with a related warrant to purchase up to $18.6 million in common stock, to the U.S. Treasury.  The warrant provides the Treasury the option to purchase up to 1,707,989 shares of Banner Corporation common stock at a price of $10.89 per share at any time during the next ten years.  “The additional capital will enhance our capacity to support the communities we serve through expanded lending activities and economic development,” said Jones.  “This capital will also add flexibility in considering strategic options that may be available to us.  We believe participation in this program should be beneficial not only to the communities we serve, but also to the employees, customers and shareholders of Banner Corporation.”

Tangible stockholders’ equity at December 31, 2008 was $419.6 million, including $115.9 million attributable to preferred stock, compared to $300.2 million at December 31, 2007.  Tangible book value per common share was $17.96 at quarter-end, compared to $18.73 a year earlier.  During the quarter ended December 31, 2008, the Company issued 171,770 shares of common stock through its Dividend Reinvestment and Stock Purchase Plan at an average price of $10.91 per share, generating approximately $1.9 million of additional paid in capital.  At December 31, 2008, Banner had 16.9 million shares outstanding, while it had 16.0 million shares outstanding a year ago.

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Cash Dividend

On December 16, 2008, Banner’s Board of Directors declared a quarterly cash dividend of $0.05 per share, payable to shareholders of record as of the close of business on December 31, 2008.  The dividend was paid on January 12, 2009.  “Our analysis indicates that the Company and its subsidiary banks have sufficient capital to accommodate the orderly collection of existing loan portfolios at current price levels and absorption rates and remain “well capitalized” during the entire process,” said Jones.  “Nonetheless, we will continue to evaluate our dividend payments on a quarterly basis during this period of uncertain economic times to ensure that we are appropriately managing our capital position.”

Conference Call

Banner will host a conference call on Thursday, January 29, 2009, at 8:00 a.m. PT, to discuss fourth quarter results.  The conference call can be accessed live by telephone at 303-262-2140.  To listen to the call online, go to the Company’s website at www.bannerbank.com.  An archived recording of the call can be accessed by dialing 303-590-3000, passcode 11119693# until Thursday, February 5, 2009, or via the Internet at www.bannerbank.com.

About the Company

Banner Corporation is a $4.6 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho.  Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans.  Visit Banner Bank on the Web at www.bannerbank.com.

This press release contains statements that the Company believes are “forward-looking statements.” These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially include, but are not limited to, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Board of Governors of the Federal Reserve System and our bank subsidiaries by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses or to write-down assets; fluctuations in agricultural commodity prices, crop yields and weather conditions; our ability to control operating costs and expenses; our ability to implement our branch expansion strategy; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board; war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and other risks detailed in Banner’s reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

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RESULTS OF OPERATIONS	Quarters Ended												Year Ended
(in thousands except shares and per share data)	Dec 31, 2008			Sep 30, 2008			Dec 31, 2007			Dec 31, 2008			Dec 31, 2007
INTEREST INCOME:
Loans receivable	$	60,603		$	64,181		$	72,592		$	256,951		$	281,135
Mortgage-backed securities		1,359			1,040			1,179			4,639			5,832
Securities and cash equivalents		2,934			2,786			2,471			11,308			8,342
		64,896			68,007			76,242			272,898			295,309
INTEREST EXPENSE:
Deposits		25,868			26,818			34,091			110,314			129,420
Federal Home Loan Bank advances		1,097			1,160			435			5,407			4,168
Other borrowings		397			734			766			2,271			3,214
Junior subordinated debentures		1,954			1,669			2,288			7,353			8,888
		29,316			30,381			37,580			125,345			145,690
Net interest income before provision for loan losses		35,580			37,626			38,662			147,553			149,619
PROVISION FOR LOAN LOSSES		33,000			8,000			2,000			62,500			5,900
Net interest income		2,580			29,626			36,662			85,053			143,719
OTHER OPERATING INCOME:
Deposit fees and other service charges		5,263			5,770			4,770			21,540			16,573
Mortgage banking operations		1,351			1,500			1,325			6,045			6,270
Loan servicing fees		478			536			625			1,963			1,830
Miscellaneous		205			286			800			1,185			2,336
		7,297			8,092			7,520			30,733			27,009
Increase (Decrease) in valuation of financial instruments         carried at fair value		13,740			(6,056	)		9,209			9,156			11,574
Total other operating income		21,037			2,036			16,729			39,889			38,583
OTHER OPERATING EXPENSE:
Salary and employee benefits		18,481			18,241			19,441			76,104			75,975
Less capitalized loan origination costs		(1,730	)		(2,040	)		(2,459	)		(8,739	)		(10,683	)
Occupancy and equipment		6,197			5,956			6,011			24,010			20,953
Information / computer data services		1,309			1,560			2,130			6,698			7,297
Payment and card processing services		1,781			1,913			1,663			6,993			5,415
Professional services		1,175			1,117			932			4,378			3,207
Advertising and marketing		2,009			1,572			2,163			6,676			8,310
Deposit insurance		2,308			701			101			3,969			373
State/municipal business and use taxes		545			572			566			2,257			1,993
Amortization of core deposit intangibles		676			691			736			2,828			1,881
Miscellaneous		3,218			3,717			3,989			13,725			12,768
		35,969			34,000			35,273			138,899			127,489
Goodwill write-off		71,121			- -			- -			121,121			- -
Total other operating expense		107,090			34,000			35,273			260,020			127,489
Income (Loss) before provision (benefit) for income taxes		(83,473	)		(2,338	)		18,118			(135,078	)		54,813
PROVISION FOR  (BENEFIT FROM ) INCOME TAXES		(4,942	)		(1,347	)		6,106			(7,085	)		17,890
NET INCOME (LOSS)	$	(78,531	)	$	(991	)	$	12,012		$	(127,993	)	$	36,923
PREFERRED STOCK DIVIDEND AND DISCOUNT ACCRETION
Preferred stock dividend		689			- -			- -			689			- -
Preferred stock discount accretion		161			- -			- -			161			- -
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	(79,381	)	$	(991	)	$	12,012		$	(128,843	)	$	36,923
Earnings (Loss) per common share
Basic	$	(4.72	)	$	(0.06	)	$	0.75		$	(7.94	)	$	2.53
Diluted	$	(4.72	)	$	(0.06	)	$	0.74		$	(7.94	)	$	2.49
Cumulative dividends declared per common share	$	0.05		$	0.05		$	0.20		$	0.50		$	0.77
Weighted average common shares outstanding
Basic		16,820,350			16,402,607			15,936,430			16,225,225			14,581,286
Diluted		16,820,350			16,402,607			16,141,941			16,225,225			14,838,469
Common shares repurchased during the period		200			- -			58,157			614,103			69,467
Common shares issued in connection with acquisitions		- -			- -			339,860			- -			2,932,471
Common shares issued in connection with exercise of stock    options or DRIP		171,770			675,186			163,379			1,499,992			1,088,875

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FINANCIAL  CONDITION
(in thousands except shares and per share data)			Dec 31, 2008		Sep 30, 2008		Dec 31, 2007
ASSETS
Cash and due from banks		$	89,964	$	80,508	$	98,120
Federal funds and interest-bearing deposits			12,786		403		310
Securities - at fair value			211,506		239,009		202,863
Securities - available for sale			53,272		- -		- -
Securities - held to maturity			52,190		55,389		53,516
Federal Home Loan Bank stock			37,371		37,371		37,371
Loans receivable:
	Held for sale		7,413		6,085		4,596
	Held for portfolio		3,953,995		3,993,094		3,805,021
	Allowance for loan losses		(75,197)		(58,846)		(45,827)
			3,886,211		3,940,333		3,763,790
Accrued interest receivable			21,219		22,799		24,980
Real estate owned held for sale, net			21,782		10,147		1,867
Property and equipment, net			97,647		97,958		98,098
Goodwill and other intangibles, net			13,716		85,513		137,654
Bank-owned life insurance			52,680		52,500		51,483
Other assets			34,024		28,329		22,606
		$	4,584,368	$	4,650,259	$	4,492,658
LIABILITIES
Deposits:
	Non-interest-bearing	$	509,105	$	521,927	$	484,251
	Interest-bearing transaction and savings accounts		1,137,878		1,086,621		1,288,112
	Interest-bearing certificates		2,131,867		2,182,318		1,848,230
			3,778,850		3,790,866		3,620,593
Advances from Federal Home Loan Bank at fair value			111,415		209,243		167,045
Customer repurchase agreements and other borrowings			145,230		104,496		91,724
Junior subordinated debentures at fair value			61,776		101,358		113,270
Accrued expenses and other liabilities			40,600		44,486		47,989
Deferred compensation			13,149		12,880		11,596
Deferred income tax liability, net			- -		- -		2,595
			4,151,020		4,263,329		4,054,812
STOCKHOLDERS' EQUITY
Preferred stock -Series A			115,915		- -		- -
Common stock			316,740		306,741		300,486
Retained earnings			2,150		82,377		139,636
Other components of stockholders' equity			(1,457)		(2,188)		(2,276)
			433,348		386,930		437,846
		$	4,584,368	$	4,650,259	$	4,492,658
Common Shares Issued:
Shares outstanding at end of period			17,152,038		16,980,468		16,266,149
	Less unearned ESOP shares at end of period		240,381		240,381		240,381
Shares outstanding at end of period excluding unearned ESOP shares			16,911,657		16,740,087		16,025,768
Book value per common share, excluding preferred stock (1)		$	18.77	$	23.11	$	27.32
Tangible book value per common share, excluding preferred stock (1) (2)		$	17.96	$	18.01	$	18.73
Consolidated Tier 1 leverage capital ratio			10.32%		8.86%		10.04%
(1)	- Calculation is based on number of common shares outstanding at the end of the period rather than weighted average shares
	outstanding and excludes unallocated shares in the ESOP.
(2)	- Tangible book value excludes goodwill, core deposit and other intangibles.

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ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
				Dec 31, 2008		Sep 30, 2008		Dec 31, 2007
LOANS (including loans held for sale):
Commercial real estate			$	1,013,709	$	1,013,919	$	882,523
Multifamily real estate				151,274		141,787		165,886
Commercial construction				104,495		113,342		74,123
Multifamily construction				33,661		22,236		35,318
One- to four-family construction				420,673		482,443		613,779
Land and land development				486,130		481,521		497,962
Commercial business				679,867		694,688		696,350
Agricultural business including secured by farmland				204,142		213,753		186,305
One- to four-family real estate				599,169		561,043		445,222
Consumer				268,288		274,447		212,149
		Total loans outstanding	$	3,961,408	$	3,999,179	$	3,809,617
Restructured loans performing under their restructured terms			$	17,852	$	15,514	$	2,750
Total loans 30 days past due and on non-accrual			$	248,469	$	137,953	$	69,031
Total delinquent loans  /  Total loans outstanding				6.27%		3.45%		1.81%
GEOGRAPHIC CONCENTRATION OF LOANS AT
		December 31, 2008		Washington		Oregon		Idaho		Other		Total
Commercial real estate			$	765,490	$	160,608	$	77,489	$	10,122	$	1,013,709
Multifamily real estate				125,571		12,570		9,735		3,398		151,274
Commercial construction				59,590		33,927		10,028		950		104,495
Multifamily construction				20,536		13,125		- -		- -		33,661
One- to four-family construction				208,699		193,025		18,949		- -		420,673
Land and land development				247,505		166,721		71,904		- -		486,130
Commercial business				506,864		75,678		80,566		16,759		679,867
Agricultural business including secured by farmland				79,817		54,918		69,407		- -		204,142
One- to four-family real estate				474,774		87,797		31,664		4,934		599,169
Consumer				194,990		54,852		17,938		508		268,288
		Total loans outstanding	$	2,683,836	$	853,221	$	387,680	$	36,671	$	3,961,408
		Percent of total loans		67.7%		21.5%		9.8%		1.0%		100.0%
DETAIL OF LAND AND LAND DEVELOPMENT LOANS AT
		December 31, 2008		Washington		Oregon		Idaho		Other		Total
Residential
	Acquisition & development		$	125,933	$	120,167	$	25,257	$	- -	$	271,357
	Improved lots			53,641		31,497		11,544		- -		96,682
	Unimproved land			28,353		11,630		26,046		- -		66,029
Commercial & industrial
	Acquisition & development			5,011		- -		193		- -		5,204
	Improved land			18,277		699		3,601		- -		22,577
	Unimproved land			16,290		2,728		5,263		- -		24,281
		Total land & land development loans outstanding	$	247,505	$	166,721	$	71,904	$	- -	$	486,130
ADDITIONAL INFORMATION ON DEPOSITS & OTHER BORROWINGS
	BREAKDOWN OF DEPOSITS			Dec 31, 2008		Sep 30, 2008		Dec 31, 2007
	Non-interest-bearing		$	509,105	$	521,927	$	484,251
	Interest-bearing checking			378,952		373,496		430,636
	Regular savings accounts			474,885		519,285		609,073
	Money market accounts			284,041		193,840		248,403
		Interest-bearing transaction & savings accounts		1,137,878		1,086,621		1,288,112
	Three-month maturity money market certificates			118,923		153,300		165,693
	Other certificates			2,012,944		2,029,018		1,682,537
		Interest-bearing certificates		2,131,867		2,182,318		1,848,230
		Total deposits	$	3,778,850	$	3,790,866	$	3,620,593
	INCLUDED IN OTHER BORROWINGS
	Customer repurchase agreements / "Sweep accounts"		$	145,230	$	103,496	$	91,724
				Washington		Oregon		Idaho		Total
	GEOGRAPHIC CONCENTRATION OF DEPOSITS AT
		December 31, 2008	$	3,004,221	$	535,998	$	238,631	$	3,778,850

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BANR- Fourth Quarter 2008 Results

January 28, 2009

Page 8

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
						Quarters Ended				Year Ended
CHANGE IN THE				Dec 31, 2008		Sep 30, 2008		Dec 31, 2007		Dec 31, 2008
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period			$	58,846	$	58,570	$	44,212	$	45,827
Acquisitions / (divestitures)				- -		- -		1,319		- -
Provision				33,000		8,000		2,000		62,500
Recoveries of loans previously charged off				715		2,357		127		3,471
Loans charged-off				(17,364)		(10,081)		(1,831)		(36,601)
		Net (charge-offs) recoveries		(16,649)		(7,724)		(1,704)		(33,130)
Balance, end of period			$	75,197	$	58,846	$	45,827	$	75,197
Net charge-offs (recoveries) / Average loans outstanding				0.42%		0.19%		0.05%		0.84%
ALLOCATION OF
ALLOWANCE FOR LOAN LOSSES				Dec 31, 2008		Sep 30, 2008		Dec 31, 2007
Specific or allocated loss allowance
	Commercial real estate		$	4,255	$	2,789	$	3,771
	Multifamily real estate			87		103		934
	Construction and land			42,045		21,932		7,569
	One- to four-family real estate			753		511		1,987
	Commercial business			16,612		23,085		19,026
	Agricultural business, including secured by farmland			530		1,097		1,419
	Consumer			1,742		2,935		3,468
		Total allocated		66,024		52,452		38,174
	Estimated allowance for undisbursed commitments			1,129		1,060		330
	Unallocated			8,044		5,334		7,323
		Total allowance for loan losses	$	75,197	$	58,846	$	45,827
Allowance for loan losses  /  Total loans outstanding				1.90%		1.47%		1.20%
								Minimum for Capital Adequacy
REGULATORY CAPITAL RATIOS AT				Actual				or "Well Capitalized"
		December 31, 2008		Amount		Ratio		Amount		Ratio
Banner Corporation-consolidated
		Total capital to risk-weighted assets	$	532,784		13.07%	$	326,071		8.00%
		Tier 1 capital to risk-weighted assets		481,697		11.82%		163,036		4.00%
		Tier 1 leverage capital to average assets		481,697		10.32%		186,696		4.00%
Banner Bank
		Total capital to risk-weighted assets		468,472		12.02%		389,695		10.00%
		Tier 1 capital to risk-weighted assets		419,450		10.76%		233,817		6.00%
		Tier 1 leverage capital to average assets		419,450		9.40%		223,058		5.00%
Islanders Bank
		Total capital to risk-weighted assets		24,088		13.27%		18,152		10.00%
		Tier 1 capital to risk-weighted assets		22,703		12.51%		10,891		6.00%
		Tier 1 leverage capital to average assets		22,703		10.74%		10,568		5.00%

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BANR- Fourth Quarter 2008 Results

January 28, 2009

Page 9

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
					Dec 31, 2008		Sep 30, 2008		Dec 31, 2007
NON-PERFORMING ASSETS
Loans on non-accrual status
	Secured by real estate:
			Commercial	$	12,879	$	6,368	$	1,357
			Multifamily		- -		- -		1,222
			Construction and land		154,823		98,108		33,432
			One- to four-family		8,649		6,583		3,371
	Commercial business				8,617		6,905		2,250
	Agricultural business, including secured by farmland				1,880		265		436
	Consumer				130		427		- -
					186,978		118,656		42,068
Loans more than 90 days delinquent, still on accrual
	Secured by real estate:
			Commercial		- -		- -		- -
			Multifamily		- -		- -		- -
			Construction and land		- -		- -		- -
			One- to four-family		124		635		221
	Commercial business				- -		- -		- -
	Agricultural business, including secured by farmland				- -		- -		- -
	Consumer				243		75		94
					367		710		315
Total non-performing loans					187,345		119,366		42,383
Real estate owned (REO) / Repossessed assets					21,886		10,153		1,885
			Total non-performing assets	$	209,231	$	129,519	$	44,268
Total non-performing assets  /  Total assets					4.56%		2.79%		0.99%
DETAIL & GEOGRAPHIC CONCENTRATION OF
	NON-PERFORMING ASSETS AT
			December 31, 2008		Washington		Oregon		Idaho		Other		Total
Secured by real estate:
	Commercial			$	6,208	$	6,671	$	- -	$	- -	$	12,879
	Multifamily				- -		- -		- -		- -		- -
	Construction and land
		One- to four-family construction			26,404		22,440		1,685		- -		50,529
		Residential land acquisition & development			38,061		33,330		5,984		- -		77,375
		Residential land improved lots			10,735		2,832		2,041		- -		15,608
		Residential land unimproved			785		- -		5,099		- -		5,884
		Commercial land acquisition & development			- -		- -		- -		- -		- -
		Commercial land improved			232		- -		- -		- -		232
		Commercial land unimproved			4,786		409		- -		- -		5,195
			Total construction and land		81,003		59,011		14,809		- -		154,823
	One- to four-family				6,008		1,257		1,508		- -		8,773
Commercial business					7,872		376		305		64		8,617
Agricultural business, including secured by farmland					774		121		985		- -		1,880
Consumer					373		- -		- -		- -		373
Total non-performing loans					102,238		67,436		17,607		64		187,345
Real estate owned (REO) and repossessed assets					14,605		5,203		2,078		- -		21,886
			Total  non-performing assets at end of the period	$	116,843	$	72,639	$	19,685	$	64	$	209,231

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BANR- Fourth Quarter 2008 Results

January 28, 2009

Page 10

ADDITIONAL FINANCIAL INFORMATION
(dollars in thousands)
(rates / ratios annualized)
			Quarters Ended						Year Ended
OPERATING PERFORMANCE			Dec 31, 2008		Sep 30, 2008		Dec 31, 2007		Dec 31, 2008		Dec 31, 2007
Average loans		$	3,988,531	$	4,001,999	$	3,716,512	$	3,935,039	$	3,437,259
Average securities and deposits			391,560		342,153		301,071		345,827		309,860
Average non-interest-earning assets			296,927		296,572		356,752		325,235		297,353
	Total average assets	$	4,677,018	$	4,640,724	$	4,374,335	$	4,606,101	$	4,044,472
Average deposits		$	3,750,383	$	3,810,718	$	3,628,581	$	3,722,012	$	3,332,098
Average borrowings			456,383		415,517		258,431		425,713		287,478
Average non-interest-earning liabilities			25,459		25,506		62,415		30,335		58,371
	Total average liabilities		4,232,225		4,251,741		3,949,427		4,178,060		3,677,947
Total average stockholders' equity			444,793		388,983		424,908		428,041		366,525
	Total average liabilities and equity	$	4,677,018	$	4,640,724	$	4,374,335	$	4,606,101	$	4,044,472
Interest rate yield on loans			6.04%		6.38%		7.75%		6.53%		8.18%
Interest rate yield on securities and deposits			4.36%		4.45%		4.81%		4.61%		4.57%
	Interest rate yield on interest-earning assets		5.89%		6.23%		7.53%		6.37%		7.88%
Interest rate expense on deposits			2.74%		2.80%		3.73%		2.96%		3.88%
Interest rate expense on borrowings			3.01%		3.41%		5.36%		3.53%		5.66%
	Interest rate expense on interest-bearing liabilities		2.77%		2.86%		3.84%		3.02%		4.03%
Interest rate spread			3.12%		3.37%		3.69%		3.35%		3.85%
Net interest margin			3.23%		3.45%		3.82%		3.45%		3.99%
Other operating income / Average assets			1.79%		0.17%		1.52%		0.87%		0.95%
Other operating income (loss) EXCLUDING  change in valuation of
	financial instruments carried at fair value / Average assets (1)		0.62%		0.69%		0.68%		0.67%		0.67%
Other operating expense / Average assets			9.11%		2.91%		3.20%		5.65%		3.15%
Other operating expense EXCLUDING goodwill write-off /        Average assets (1)			3.06%		2.91%		3.20%		3.02%		3.15%
Efficiency ratio (other operating expense / revenue)			189.15%		85.72%		63.68%		138.72%		67.74%
Return (Loss) on average assets			(6.68%)		(0.08%)		1.09%		(2.78%)		0.91%
Return (Loss) on average equity			(70.24%)		(1.01%)		11.22%		(29.90%)		10.07%
Return (Loss) on average tangible equity (2)			(83.44%)		(1.24%)		15.28%		(38.51%)		13.27%
Average equity  /  Average assets			9.51%		8.38%		9.71%		9.29%		9.06%
(1)	- Earnings information excluding the fair value adjustments and goodwill impairment charge (alternately referred to as operating income from    recurring operations and expenses from recurring operations) represent non-GAAP (Generally Accepted Accounting Principles) financial    measures.
(2)	- Average tangible equity excludes goodwill, core deposit and other intangibles.